China Airlines v CA (406 SCRA 113)
Lao’s act in giving
FACTS:
Respondents, Antonio Salvador and Rolando Lao
planned to travel to Los Angeles, California to pursue
a cable business deal involving the distribution of
Filipino films. Initially, Morelia Travel Agency booked
their flight with China Airlines (CAL). Upon
discovering that Morelia charged higher rates than
American Express Travel (Amexco), they dropped the
services of Morelia and engaged the services of
Amexco because Lao is an Amexco cardholder.
Lao then gave to Amexco the record locator number
that CAL issued previously to Morelia. CAL confirmed
the booking. So, with the confirmation of the booking,
Amexco issued the corresponding tickets. CAL
subsequently, called Morelia to follow up on the
reserved booking of Salvador and Lao, because
Morelia received no payment, it revoked the reserved
booking of the respondents. So, China Airlines
cancelled the reservations with Morelia and revoked
the booking it had made for them.
On June 13, 1990, while at the airport to board their
flight, the private respondents were prevented from
boarding because their names were not on the
passengers manifest. They were only able to board via
Northwest Airlines the following day. The RTC
rendered a decision in favor of Respondents then CAL
was ordered to pay Php 10, 000 by way of nominal
damages, Php 50, 000 by way of exemplary damages,
and Php 50, 000 by way of attorneys fees. So, the
Court of Appeals affirmed the ruling of the lower
court.
ISSUE (1): WON there was a breach in the contract
of carriage? YES.
(2): WON there was bad faith on the part of
China Airlines? NO.
(3): WON there was basis on the basis on the
award of damages? YES but only NOMINAL
DAMAGES.
RULING (1):
The confusion with the confirmation and cancellation
of the reservations began when Lao gave to Amexco
the record locator number that CAL had already
assigned to Morelia. A record locator number is a
combination of letters and numbers issued by an
airline to a travel agency when the airline confirms the
travel agency’s booking. Industry practice prohibits a
travel agency to use the record locator number of
another travel agency, as this will usurp the booking
of another travel agency.
Lao and Amexco are not blameless.
Morelia’s record locator number to Amexco, after
deciding to terminate Morelia’s services, amounted to
accepting the benefit of Morelia’s services without
paying for it. Amexco used Morelia’s record locator
number when Amexco found out it could no longer
book private respondents without Morelia’s record
locator number. However, the greater blame falls on
CAL. When CAL confirmed the reservations of private
respondents, a contract of carriage arose between
CAL and private respondents, even if Amexco, not
Morelia, confirmed the reservations of private
respondents. Because of CAL’s confirmation, Amexco
issued to private respondents the confirmed tickets.
The nature of an airline’s contract of carriage
partakes of two types, namely: (1) a contract to
deliver a cargo or merchandise to its destination, and
(2) a contract to transport passengers to their
destination. In this case, when CAL confirmed the
reservations, it bound itself to transport private
respondents on its flight on 13 June 1990.
The airline business is intended to serve the traveling
public primarily and is thus imbued with public
interest. The law governing common carriers
consequently imposes an exacting standard. Thus, in
an action based on a breach of contract of carriage,
the aggrieved party does not have to prove that the
common carrier was at fault or was negligent. All
that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier.
CAL does not deny its confirmation of the reservations
made by Amexco. The confirmed tickets issued by
Amexco to private respondents upon CAL’s
confirmation of the reservations are undeniable proof
of the contract of carriage between CAL and private
respondents. In Alitalia Airways v. CA, Et Al., we held
that when an airline issues a ticket to a passenger
confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has
every right to expect that he would fly on that flight
and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage.
CAL did not allow private respondents, who were then
in possession of the confirmed tickets, from boarding
its airplane because their names were not in the
passengers’ manifest. Clearly, CAL breached its
contract of carriage with private respondents.
RULING (2):
Bad faith does not simply connote bad judgment or
negligence. It means breach of a known duty through
some motive, interest or ill will that partakes of the
nature of fraud. A finding of bad faith entitles the Not entitled to exemplary damages because CAL was
offended party to moral damages. not in bad faith and its employees did not act in a
wanton, fraudulent, reckless, oppressive or
The settled rule is bad faith should be established by malevolent manner. (Art 2232 of Civil Code)
clear and convincing evidence since the law always
presumes good faith. Not entitled to actual damages because respondents
did not shell out any money for their CAL tickets.
Based on the testimonies of the officers of CAL, not Northwest tickets ($625) cost less than CAL tickets
one but two different officers made the confirmation ($629). The court cannot order reimbursement of the
and pre-flight checking of the airline. Northwest tickets because this would have enabled
respondents to fly for free. The cost of the tickets
To its credit, CAL still exerted its best efforts to notify were a necessary expense that private respondents
private respondents. They even called Morelia twice could not pass on to CAL.
to confirm the cancellation of the ticket. CAL did not
deliberately bump off private respondents to The court may award nominal damages purely to
accommodate other passengers as they did not know vindicate a right of a plaintiff which defendant has
of any other passengers to take the seats. violated and not to indemnify any loss the plaintiff has
suffered.
It was CAL’s hasty confirmation of the reservations of
Amexco that established the contract of carriage So, Entitled to nominal damages of P5,000 because
between CAL and private respondents. CAL failed to the plaintiff suffered some species of injury not
honor its contract of carriage. However, CAL was not enough to warrant an award of actual damages.
wanton or reckless in cancelling private respondents’
reservations. CAL made the cancellation in
conformity with its usual procedure, which was
neither unreasonable nor arbitrary considering that
CAL cancelled the reservations at the behest of
Morelia. While Morelia did not issue any ticket to
private respondents, on record Morelia still stood as
the travel agent that booked the reservations of
private respondents since neither CAL nor Morelia
endorsed the booking to Amexco. Thus, when Morelia
cancelled the reservations, CAL had to accede as if
private respondents themselves had asked for the
cancellation. Private respondents’ names were
consequently not included in the passenger’s
manifest.

ISSUE (3):
CAL’s negligence caused it to breach its contract of
carriage. CAL’s negligence is, however, not so gross to
amount to bad faith. Mere negligence, even if it
causes the plaintiff to suffer mental anguish or serious
fright, is not a ground for awarding moral damages.

The law distinguishes a contractual breach effected

in good faith from one attended by bad faith. Absent
fraud or bad faith on defendant’s part in breaching
his contract, his liability for damages is limited to the
natural and probable consequences of the breach of
the obligation, which the parties had foreseen or
could have reasonably foreseen. In such a case, the
liability would not include moral damages. For this
reason, not every case of mental anguish, fright or
serious anxiety calls for the award of moral damages.